US Commodity Futures Trading Comm v. Sharif

Filing
36

UNITED STATES DISTRICT COlJRT
FOR THE DISTRICT OF CONNECTICUT'
NEW HAVEN DIVISION
U.S. Commodity Futures Trading
Commission,
Case No. 3:12-cv-01670·SRU
Plaintiff,
Hon. Stefan R. Underhill
VS.
CONSENT ORDER FOR
PERMANENT INJUNCTION,
CIVIL MONETARY PENALTY
AND OTHER EQUITABLE
RELIEF
Feisal Sbarif, '
Defendant.
I. INTRODUCTION
On November 26, ·20 12, Plaintiff Commodity Futures Trading Commission
("Commission" 01' "CFTC") filed a Complaint against Defendant Feisal Sharif ("Defendanf')
seeking injunctive and other equitable relief, as well as the imposition of civil penalties, for
violations of Sections 4b(a)(2)(i)M(iii) (for acts before June 18,2008), 4b(a)(1)(A)M(C) (for acts
on or,after .Tune 18,2008), , Q(1), and 4m(1) of the Commodity Exchange Act (the "Act"), 7
4
U.S.C. §§ 6b(a)(2)(i)-(iii), 6b(a)(1)(A)M(C), 6Q(1) and 6m(1) (2006 and Supp. V 2012).1 (Dlct.
No. 1.) The Court entered a Consent Order for Preliminary Injunction against Defendant 011
February 7, 2013. (Dkt. No. 26.)
All Sections of the Act that have been amended, illl'elevant part, by the Dodd-Frank Wall Stmet Reform
and ConsumeI' Protection Act of2010 Pub. L. No. 111 203, Title Vll §§ 701 774, 124 Stat. 1376 (enacted July 21,
2010) or the Food, Conservatipn, and Energy Act of2008, Pub. L. No. 110-246, Title XIII (the CFTC
Reallthorjzatioll Act of2008 §§ 13102-13204, 122 Stat. 1651 (enacted June 18, 2008), are cited as follows: "Section
x of the Act, 7 U.S.C. § x (Supp. V 2012)." All Sections of the Act that were neither amended by the CRA not'
Dodd-Fran.k Act in relevant part are cited as follows: "Section ~ of the Act, 7 U.S.C. § x (2006)."
M
M
1
II. CONSENTS AND AGREEMENTS
To effect settlement of all charges alleged in the Complaint against Defendant without a
trial on the merits or any further judipiul proceedings, Defendant:
1.
Consents to the entry ofthis Consent Order for Permanent Injunction, Civil
Monetary Penalty and Other Equitable Relief Against Defendant ("Consent Order");
2.
Affirms that he has 1'ead and agreed to this Consent Order voluntarily, and that no
promise, other than as specifically contained herein, or threat, has been made by the Commission
01'
any member, officer, agent 01' representative thereof, 01' by any other person, to induce consent
to this Consent Order;
3.
Acknowledges service of the summons and Complaint;
4.
Admits the judsdiction of this Court over him and the subject matter ofthis action
pursuant to Section 6c of the Act, 7 U.S.C. § 13a~1 (Supp. V 2012);
5.
Admits the jurisdiction of the Commission over the conduct and transactions at
issue in this action pursuant to the Act, 7 U.S.C. §§ 1, et seq.;
6.
Admits that venue properly lies with this Court pursuant to Section 6c(e) of the
Act, 7 U.S.C. §
7.
13a~1(e)
(2006);
Waives:
(a) any and all claims that he may possess under the Equal Access to Jllstice Act,
5 U.S.C. § 504 (2006) and 28 U.S.C. § 2412 (2006), andlor the rules promulgated by the
Commission in conformity therewith, Part 148 of the Regulations, 17 C.F.R. §§ 148.1 et seq.
(2012), relating to,
01'
arising from, this action;
(b) any and all claims that he may possess under the Small Business Regulatory
Enforcement Fai1'l~ess Act of 1996, Pub. L. No.
104~121,
2
§§
201~253,
110 Stat. 847,857-868
(1996), as 'amended by Pub. L. No. 110-28, § 8302, 121 Stat. 112, 204-205 (2007), relating to,
01'
arising from, this action;
(c) any claim of Double Jeopardy based upon the institutiol1 of this action 01' the
entry in this action of' any order imposing a civil monetary penalty or any other relief, including
this Consent Ol'del'; and'
(~)
8.
any and alll'ights of ~ppeal from this action;
Consents to the continued jurisdiction of this Court over him for the purpose of
implementing and enforcing the terms and conditions of this Consent Order and for any other
purpose relevant to this'action, even if Defendant now or in the future resides outside the
jurisdiction of'this Court;
9.
Agrees that he will not oppose,enforcement of this Consent Order by alleging that
it fails to comply with Rule 65(d) of the Federal Rules of Civil Procedure and waives any
objection based thereon;
10.
Agrees that neither he nor any of his agents 01' employees under his authority or
control shall take any action or make any public statement denying, directly or indirectly, any
allegat,ion in the Complaint 01' the Fitidings of Fact or Conc~usions of Law in this Consent Order,
or creating 01' tendhlg to' create the impression that the Complaint and/or this Consent Order is
without a factual basis; provided, however, that nothing in this provision shall affect his: (a)
testimonial obligations, 01' (b) right to take legal positions in other proceedings to which the
Commission is not a party, Defendant shall undertake all steps necessary to ensure that all of his
agents and/or employees under his authority 01' control understand and comply with this
agreement; and
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11.
Admits to all of the findings made in this Consent Order and all of the allegations
in the Complaint. Further, Defendant agrees and intends that the allegations contained in the
Complaint and all of the Findings of Fact and Conclusions of Law contained in this Consent
Order shall be taken as true and correct and be given preclusive effect, without further proof, in
the course of: (a) any current 01' subsequent bankruptcy proceeding filed by, on behalf of, 01'
against Defendant; (b) any pl'oceedit1g pursnantto Section 8a of the Act, as amended, 7 U.S.C. §
12a, and/or Pa113 of the Regulations, 17 C,F.R. §§ 3.1' et seq, (2012); and/or (c) any proceeding
to enforce the terms of this Consent Order.
12.
n~ai1,
Agrees to provide immediate notice to this Court and the Commission by certified
in the maIU1er required by paragraph 70 of Part VI of this Consent Order, of any ' .
bankruptcy proceeding filed by, on behalf of,
01'
against him, whether inside 01' outside the
United States, and
13.
Agrees that no provision of this Consent Order shall in any way limit or impali'
the ability of any Qther person 01' entity to seek any legal 01' equitable remedy against Defendant
in any other proceeding.
TIL FINDINGS OF FACT AND CONCLUSIONS OF LAW
The Court, being fully advised in the premises, finds that there is good cause for the entry
of this Consent Order and that there is 110 just reason for delay. The Court therefore directs the
entry of the following Findings of Fact, Conclusions of Law, permanent injunction and equitable
relief pursuant to Section 6c of the Act, 7 U,S.C, § 13a 1 (Supp. V 2012), as set foi,th herein.
w
THE PARTIES AGREE AND THE COURT HEREBY FINDS:
4
A. Findings of Fact
1. The Pat' tics To This Consent Order
14.
Plaintiff Commodity Futures TI'ading Commission is au independent federal
regulatory agency that is charged by Conwess with administering and enforcing the Act, as
amended, 7 U.S.C. §§ 1 et seq., and the Regulations promulgated thereunder, 17 C.F.R. §§ 1.1 et
seq. (2013).
15.
Defendant Feisal Sharif currently resides in Branford, Connecticut. From at
least January 2007 and until September 13, 2012 ("relevant pedod"), Defendant also resided in
Wolcott and /01' West Haltford, Connecticut. He is the manager/member, principal and
registered agent of First Financial LLC ("First Financial" 01' the "Pool"), which he operated from
.
.
his residence. Defendant registered First Financial as a domestic limited liability company in
Connecticut in 2003. He was previously registered with the Commission as an associated person
. ("AP") and principal of Sharif Capital Management LL~ e'Sharif Capital") from August 2003 to
July 2007. Sharif Capital was a registered commodity pool operator e'CPO") and commodity
trading advisor ("CTA") from September 2003 to July 2007. First Financial has not been
registered with the Conunission in any capacity. Defendant has not been registered in any
capacity with the Commission since July 2007.
2. Defendant's Operation of First Financial
16.
First Financial is a Connecticnt limited liability company created by Defendant on
June 5, 2003, with a .principal place of business located in Wolcott, Connecticut. First
Financial's mo~t recent principal place of business was BranfOl'd, Connecticut. First Financial is
a conIDlOdity pool created by Defendant, in part, for the purpose of trading commodity futures
5
("futures\» on behalf of at least fifty members of the general public residing in the United States
("Pool Pmticipants"). Defendant is First FinanciaPs unregistered CPO.
17.
During the relevant period, Defendant opel'ated a Ponzi scheme by which he
fraudulently solicited approximately $5.4 million from Pool Participants to invest with First
Financial f01' the purpose of trading futmes. '
18.
During the relevant period, Defendant controlled the day-to-day operations of
First Financial, including making the Pool's trading decisions, soliciting and accepting funds
from prospective Pool Participants, opening a bank account in the Pool's name, and opening
trading accounts at registered futures commission merchants ("FCM") in the Pool's name to
trade futures on behalf of the Pool Participants.
19.
In January 2004, Defendant opened a trading account in the name of First
Financial at Velocity Futures LLC ("Velocity"), a registered FCM. In this account, Defendant
tr~ded
futures, including but not limited to contracts in the e-Mini S&P, e-NASDAQ and e-
Russell.
20.
In July 2008, Defendant opened a trading account in the ilame of First Financial at
TradeStation Securities Inc. ("TradeStatioll"), a registered FCM. In this account, Defendant
traded futures, including hut not limited to contracts in the e-Mini S&P and e-Russell .
21.
.
During the relevant period, Defendant solicited and received approximately $5.4
million from at least fifty Pool Participants for the purpose oftrading futures in-the Pool.
22.
Defendant solicited Pool Participants and prospective Pool Participants to write'
checks, wire monies, or transfer funds to a First Financial ban1e account telling them that theh'
money would be pooled with funds from other Pool Pal'ticipmlts and that Defendant would use
the money to trade, among other things, futtU'es on behalf of all Pool Participants. In order to
6
transmit fll1lds to the pool, Defendant instructed Pool Pmticipants to either give him checks made
payable to First Financial or to send funds directly to a bank account in ,the name of First
Financial.
23.
One Pool Participant, after having invested with the Pool ful' many months,
believing the investment to be very profitable, executed a "Financial Investment Contract
Agreement" Q1ereinaftel' "Agreement") on August 17,2011 with Defendant to increase his
investment in the Pool.
24.
Pursuant to the Agreement, Defendant, as the manager of First Financial, was
prohibited from investing First Financial funds in any "personal expmses" and that any account
management fee would be " ... fifteen (15) percent of the Client's monthly gross profit amount"
and in the event of no monthly profit the fee would be waived for that particular month.
3. Defendant's Solicitations and Misrepresentations to Pool Participants
25.
BegiIUling at least as early as January 2007, Defendant began soliciting
prospective Pool Palticipants to invest in the Pool. Defendant met with some Pool Participants
,
,
to show them he was trading futures in the Pool.
26.
Thereafter, in order to induce some prospective Pool Participants to invest in the
Pool, Defendant orally pronlised some prospective Pool Participants a guaranteed monthly retum
of at least 1% and sometimes up t'o 15 % on the pl'ospective Pool Participants' principal if they
invested in the Pool.
27.
These promises by Defendant of a guaranteed monthly return of at least 1% and
sometimes up to 15% to some of the prospective Pool Participants were materially false and
misleading.
7
r
28.
PUl'suant to the Agreement, Defendant represented that the past perfonnance of
First Financial was:
"5 Year Net Returns:
2006 20%
*2007, 27%
*2008 21%
*2009 19%
*2010 18%
*2011 11% (January to July)
The asterisk (*) indicates each year in which the U.S. economy and the global economy was in a
deep recession." .
29.
These representations made by Defendant to this Pool Participant in the
Agreement regarding the past performance of First Financial foi- 2007 through 2011 were
materially false and misleading. In fact, from 2007 through 2011 the Pool net retul'llS never
reached these levels of profit, and most often the Pool lost money . .
30.
Further, pursuant to the Agreement, Defendant represented to at least 011e Pool
Participant that he would receive a rettu'n mte of not less than 2.25% pet' month for the entire
term of the Agreement.
31.
This representation made by Defendant to this Pool Participant regarding the
monthly rate ofretul'll that this Pool Participant would receive was materially false and
misleading.
32.
Defendant made the oral misrepresentations to prospective Pool Participants
regarding guaranteed retu1'l1S as well as the misrepresentations in the Agreement to the one Pool
Participant concel'lling First Financial's past performance as well as the monthly rate ofl'eturn
that this Pool Participant would receive knowing them to be false '01' with reckless disregard as to
their truth.
8
4. Defendant Issued False Account Statements to Pool PaR'ticipants
a,
33.
The False First Financial Account Statements
Defendant prepared and sent, by U.S. Mail, Inonthly First Financial account
statements to Pool Participants purporting to show the net value of their investment in the Pool.
34.
The monthly First Financial account statements that Defendant provided to Pool
Pm1icipants for the most palt consistently reflected that the Pool Participants' investments were
profitable.
35.
These monthly First Financial account statements prepared by Defendant are
materially false and misleading. Defendant did not invest all ofttie Pool Participants' funds
entl'Usted to him in futures
01'
deposit them into trading accounts in the name of First Financial;
rathel', Defendant only traded approximately 25% of the Pool PruticipantE1 funds. Further, of
those funds that Defendant traded, Defendant lost the vast mE\jol'ity of those funds and the trading
accounts were seldom profitable on a monthly basis. Therefore, the representations of monthly
and yearly profitable returns on the First Financial account statements, which Defendant
provided to Pool Palticipants, were false.
36.
Defendant made the misrepresentations in the First Financial account statements ·
Imowing them to be false or with reckless disregard as to their truth.
b. The False Velocity and Tt'adeStation Account Statements
37.
'FUliher, in order to entice Pool Participants to remain invested in the Pool and/or
to make additional investnients into the Pool, Defendant fabricated trading aCCollnt statements
from Velocity and TradeStation. He showed the fabricated trading account statements to Pool
Participants to falsely assure them that he had not lost their funds' and that their funds r~mained
safe in the Pool's trading accounts.
9
38.
For example, in 2010, Defendant approached one Pool Participant about making a
larger investment in the Pool. During this meeting, the Pool Participant asked Defendant to
verify the amount of money in the First Financial trading accounts. In response to the Pool
Participant's inquiry, Defendant showed the Pool Participant an account statement from Velocity
that purportedly showed a balance of$861,036.08 in First Financial's trading account at Velocity
as of March 1,2010. Based on this representation the Pool Pa11icipant invested an additional
$100,000 in the Pool.
39.
Unlmown to the Pool Pa11icipant, the March 2010 Velocity account statement was
false. In reality, the balance of First Financial's trading account was $1,858.00 as of March 1,
2010.
40.
Thereafter in 2012, after the Pool Participant made a redemption request to
Defendant for a return of his principal that went unfulfilled, Defendant showed the Pool
Participant's spouse an account statement from Velocity that showed a balance of $2,265,297.94
in First Financial's trading account at Velocity as of May 31,2012.
41.
Again, unlmown to the Pool Participant, the May 2012 Velocity account
statement w~s false. In reality, the balance of First Financial's trading account was $1,192.48 as
of May 31, 2012.
42.
Defendant later admitted to the,PoolPm1icipant that the March 2010 and May
2012 Velocity account statements Defendant had shown him were false.
43.
Defendant made the misrepresentations in the Velocity and Tl'adeStation account
statements knowing them to be false or with l'eckles,s disregard as to their truth.
10
5. Defendant Misnppl'opl'iated Pool Participant Funds
44.
01'
Rathel' than use all of the Pool Participants' funds entrusted to him to trade futlll'es
return those funds back to the Pool Participants, Defendant misappropriated $900,000 of Pool
Participants' funds for his personal use. Specifically, during the relevant period, Defendant
solicited $5.4 million from Pool Participants, lost $1.32 million in futures trading accounts in the
name of First Financial held at Velocity and TradeStation, and paid out $3.17 million to certain
Pool Pal:ticipants as fictitious "profits" or retu1'J1S of pl·incipal. The difference between those
amounts is the $900,000 that is unaccounted for and which Defendant misappropriated.
45.
On multiple occasions, during the relevant period, Defendant wired or transferred
Pool Participants' funds from First Financial's bank account to his personal bame account.
FUliher, Defendant used the First Financial bank account as his personal ATM, withdrawing cash
whenever he needed it, and paying thousands of dollars for gifts and his pel'sonalHving
.
.
expenses.
Moreover, the value ofthes~ transfers far exceeds the amount of any commissions
46.
and/or fees that Defendant told Pool Participants he would be paid 01' indeed, that he was entitled
to take for trading performance because the Pool's trading accounts were seldom profitable and
suffered overall losses of $1.32 million.
In or a~out June 2012, a Pool Participant made numel'OUS redemption requests to
47.
Def~ndant for
. a return of his remaining principal in First Financial. In response, Defendant
.
pl'oyided the Pool Participant with luultiple checlcs drawn on First Financial's bank account.
When the Pool Paliicipant attempted to deposit the checks with his bank, those checks .bounced
for insufficient funds. Thereafter, Defendant met with the Pool Participant and admitted that he
was operating a Ponzi scheme.
11
B.
Co~clusiollS
of Law
1, Jurisdiction and Venue
48.
This Court has jurisdiction over this action pursuant to Section 6c of the Act,
7 U.S.C. § 13a-1 (Stipp. V 2012), which provides that whenever it shall appeal' to the
Commission that any perSOll has engaged, is engagipg, 01' is about to engage in any act 01'
practice constituting a violation of any provision of the Act 01' any rule, l'egulation, 01' order
promulgated thereunder, the Commission may bring an action in the proper district court of the
United States against such person to eI~oin such act 01' practice, 01' to enforce complianc~ with
the Act, 01' any rule, regulation ~1' order thereunder.
49.
Venue properly lies with this Court pursuant to Section 6c(e) ofthe Act, 7 U.S.C.
§ 13a-1 (e) (Supp. V 2012), because the Defendant resides in this jurisdiction ,and the acts and
practices in violation of the Act occurred within this District.
2. FutUl'es Fl'aud and Fraud as a Commodity Pool Operator by
Misrepl'esentations, False Account Statements, and Misappropriation of Pool
Participant Funds
'
50.
By the conduct described ill paragraphs 16 tlu'ough 47 above, Defendant cheated
and defrauded, 01' attempted to cheat and defraud, and willfully deceived, 01' attempted to
deceive, and otherwise engaged in a course of business that operated as a fraud 011 his Pool
Patiicipants and prospective PooI'Pal'ticipants by, among other things, 10l0wingly 01' recklessly:
making fraudulent misrepresentations, creating and issuing false account statements, and
misappropriating Pool Participant funds while operating First Financial, in violation of Sections
4b(a)(2)(i)-(iii) (for acts before JUl1e 18,2008), 4b(a)(1)(A)-(C) (fot· acts on 01' afte1' June 18,
2008), and 4Q(1) of the Act, 7 U.S.C. §§ 6b(a)(2)(i)-(iii), 6b(a)(1)(A)-(C), a'nd 6Q(1) (2006 and
Supp. V 2012).
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3. Faihu'c to Registel' as a CPO
51.
Prior to July 15,2011, Section la(S) of the CEA, 7 U.S.C. § 1a(S) (Supp. II 2009),
defined a Commodity Pool Operator ("CPO") as
any persoll engaged in a business that is of the nature of an investment t11lst,
syndicate, 01' similar form of enterprise, and who, ill COlmection therewith, solicits,
accepts, or receives from others, funds, secul'ities, 01' propel'ty, either directly 01'
tlu'ough capital contdbutiollS, the sale of stock or other forms of securities, 01'
othel'Wise, for the purpose of trading in any conunodity for future delivelY all or
subject to the lUles of any contract market or derivatives transaction execution
facility, except that the term does not include such person not within the intent of the
definition of the term as the Conunission may specify by rule, regulation, 01' order.
52.
defin~s
Since July 16,2011, Sectionla(ll) of the CRA, 7 U.S.C. § 1a(ll) (Supp. V 2012),
a CPO as, any person who is
(i)
engaged in a business that is of the nature of a commodity pool, investment
tlust, syndicate, or similar form of enterprise, and who, in connection
therewith, solicits, accepts, 01' receives from other~ funils, securities, 01'
property, either directly or tlu'ough capital contributions, the sale of stock 01'
othel' fOlms of securities, 01' othel'Wise, for the purpose of trading in
commodity interests, including anyc
(I) commodity for future delivery, security futures product, 01' swap;
(II) agreement, contract, 01' transaction described in section 2(c)(2)(C)(i) of
this title 01' section 2(c)(2)(D)(i) of this title;
(III) commodity option authorized undeI' section 6c ofthis title; 01'
(IV) leverage transaction authorized under section 23 of this title; 01'
(ii) '
who is registered with the Commission as a commodity pool operatoI'.
53.
Section4m(1) of the CEA, 7 U.S.C. § 6m(1) (2006), provides that it is unlawful
fo1' any CPO, unless l'egistered, to make use of the mails 01' any means 01' instrumentality of
interstate commerce in connection with its business as a CPO.
54.
By the conduct described in paragraphs 16 tlu'ough 47 above, Defendant acted as
a CPO during the Relevant Period without registering with the Commission and did not qualify
13
, I
for a registration exemption under the Act, the Act as amended
01'
the Regulations. As such,
Defendant has violated Section 4111(1) of the Act, 7 U.S.C. § 6m(1) (2006).
55.
Unless restrained and enjoined by 'this COlll't, there is a reasonable likelihood that
the Defendant will continue to engage in the acts and practices alleged in the Complaint and in
similar acts and practices in violation of the Act and Regulations.
IV. PERMANENT INJUNCTION
IT IS HEREBY ORDERED THAT:
56.
Based upon and in connection with the foregoing conduct, pursuant to Section 6c
of the Act, 7 U.S.C. § 13a-1 (Supp. V 2012), Defendant is permanently restrained, el~oined and
prohibited fi'om directly 01' indirectly from violating S~ctions 4b(a)(1)(A)-(C), 4.Q(1), and 4111(1)
of the Act, 7 U.S.C. §§ 6b(a)(1)(A)-(C), 6Q(l) ali~ 6m(1) (2006 'and Supp. V 2012);
57.
Defendant is also permanently restrained, enjoined and pl'Ohibited fi:om directly 01'
indirectly:
a.
Trading on 01' subject to the !'Ules of ailY registered entity (as that term is
defined in Section la ofthe Act, 7 U.s.C. § la (Supp. V 2012»;
b.
Entering into any transactions involving commodity futtU'es, options on
commodity futures, commodity options (as that term is defined in
Regulation 1.3 (hh), 17 C.F.R. § 1.3(hb) (2013» ("commodity options"),
security futures products, foreign CUl'l'ency (as described in Sections
2(c)(2)(B) and 2(c)(2)(C)(i) of the Act, 7 U.S.C. §§ 2(c)(2)(13) and
2(c)(2)(C)(i) (Supp. V 20l3» (''forex contracts"), and/or swaps (as that term
is defined in Section 1a(47) ofthe Act, 7 U.S.C. § 1a(47) (Supp. V 2013),
and as further defined by Regulation 1:3 (xxx) (2012), 17 C.F.R. §
14
1.3(xxx) (2013» for his own personal account 01' for any account in which
he has a direct or indirect interest;
c.
Having allY conullodity futmes, options on commodity futl1l'es, conunodity
options, secUl'ity futures products, fOl'ex contracts. and lor swaps traded on
his behalf;
d.
Controlling 01' directing the trading for 01' on behalf of any other person or
entity, whether by power of attorney 01' otherwise, i~ any account
involving commodity futures, options 011 commodity futures, ponunodity
options, security futures products, 'fOl'ex contracts andlor swaps;
e,
Soliciting, receiving 01' accepting any funds from any perSOll for the
purpose of purchasing or selling any commodity futures, options on
. commodity futures, conU110dity options, security futures products, fOl'ex
contmcts, andlor swaps;
f.
Applying for registration 01' claiming exemption fi:om registration with the
Commission in any capacity, and engaging in a.ny activity requiring such
registration 01' exemption from registration with the Commission, except
as provided for in Regulation 4.14(a)(9), 17 C.F.R. § 4.14(a)(9) (2013);
and
g.
Acting as a principal (as that term is defined in Regulation 3.1 (a), 17
C.F.R. § 3, 1(a) (2013», agent 01' any other officer 01' eluployee of any
person (as that term is defined in Section la of the Act~ 7 U.S.C. § 1a
(Supp. V 2012» registered, exempted from registration 01' required to be
registered with the Conunission except as provided for in Regulation
15
4.14(a)(9), 17 C.P.R. § 4. 14(a)(9) (2013).
V. STATUTORY AND EQUITABLE RELIEF
A.
Restitution
58.
Defendf\nt shall pay restitution in the amount of two million, two-hundred thirty
thousand dollars· ($2,230,000), plus post-judgment interest to defrauded Pool Participants
("Restitution Obligation") within ten (10) days of the date of the entry ofthis Consent Order. If
the Restitution Obligation is not paid in full within ten (10) days of the date of entry, of this
Consent Order, then post"judgnlent interest shall accme on the Restitution Obligation beginning
on the date of entry ofthis Consent Order and shall be determined by using the Treasury Bill rate
pl'evailing on the date of entry of this Consent Order pursuant to 28 U.S.C. § 1961 (2006).
59.
To effect payment of the Restitution Obligation ar.d, the distribution of any
restitution payments to Defendant's Pool Palticipants, the Court appoints the National Futures
Association ("NFA") as Monitor ("Monitor'} The Monitor shall collect restitution payments '
from Defendant and make distributions as set forth below. Because the Monitor is acting as an
officer of this Court in performing these services, the NFA shall not be liable for any action 01'
i11action arising from NFA's appointment as Monitor, other than actions involving fraud.
60.
Defendant shall make Restitution Obligation payments under this Consent Order
to the Monitor in the name "Feisal Shal'if - Restitution Fl1l1d" and shall send such Restitution
Obligation payments by elect1'Onic funds transfer,
bank cashi~r's,
01'
01'
by U.S. postal money order, certified check,
bank money order, to t11e Office of Administration, National Futures
Association, 300 South Riverside Plaza, Suite 1800, Chicago, illinois 60606l111der cover lettel'
that identifies the paying Defendant and the name and docket number of this proceeding.
Defendant shall simultaneously transm.it copies of the cover letter and the form of payment to the
16
Chief Financial Officer, Commodity Futures Trading COlllmission, Three Lafayette Centre, 1155
21st Street, NW, Washington, D.C. 20581.
61.
The Monitor shall oversee the Restitution Obligation and shall have the discretion
to determine the manner of distribution of sllch funds in an equitable fashion to Defendant's Pool
Palticipants identified by the Commission 01' may defer distribution until such time as the
Monitor deems appropriate. In the event that the amount of Restitution Obligation payments to
the Monitor are of a de minimis nature such that the Monitor determines that the administ1'ative
cost of making a distribution to eligible Pool Participants is impractical, the Monitor may, in its
discretion, treat such restitution payments as civil monetary penalty payments, which the
Monitor shall forward to the Commission following the instlUctiollS for civil monetary penalty
below.
payments set forth in Part V.B. "
62.
Defendant shall cooperate with the Monitor as appl'Opriate to provide such
information as the Monitor deems necessary and appropriate to identify Defendant's Pool
Participants to whom the Monitor, in its sole discretion, may determine to include in any plan for
distribution of any Restitution Obligation payments. Defendant shall execute any documents
necessary to release funds that he has in any repository, bank, investment 01' other financial
institution, wherever located, in order to make partial 01' total payment toward the ~estitutioll
Obligation.
63.
The Monitor shall provide the Commission at the beginning of each calendar year
with a report detailing the disbursement of funds to Defendant's Pool Participants during the "
previous year. The Monitor shall transmit this repOlt under a covel' letter that identifies the name
and docket number of this proceeding to the Chief Financial Officer, C0l1ll11odity Futures
Trading Commission, Tlu'ee Lafayette Centre, 1155 21st Street, NW, Washington, D.C. 20581.
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64.
The amounts payable to each Pool Participant shall not limit the ability of any
Pool Participant from proving that a greater amount is owed ffOl11 Defendant 01' any other perSOll
01'
entity, and nothing herein shall be construed in any way to limit 01' abridge the rights of any
Pool Participant that exist under state or common law.
65.
Pursuant to Rule 71 of the Federal Rules of Civil Procedure, each Pool Participant
of Defendant who suffered a loss is explicitly made an intended third-party beneficiary of this
Consent Order and may seek to enforce obedience ofthis Consent Order to obtain satisfaction of
any portion of the restitution that has not been paid by Defendant to ensure continued
compliance with any provision of this Consent Order and to hold Defendant in contempt for any
violations of any provision ofthis Consent Order.
66.
To the extent that any funds accrue.to the U.s. Treasmy for satisfaction of
Defendant's Restitution Obligation, such funds shall be transferred to the Monitor for
disbursement in accordance with the procedures set forth above:
B. Civil Monetal'Y Penalo/
67.
Defendant shall pay a civil monetary penalty in the amount of nine hundred
thousand dollars ($900,000) ("CMP Obligation"), plus post-judgment interest, within ten (10)
days of the date of~he entry of this Consent Order. Post-judgment interest shall accrue on the
CMP Obligation beginning on the 'date of entry of this Consent Order and shall be determined by
using the Treasury Bill rate prevailing on the date of entry of"this Consent Order pursuant to 28
U.S.C. § 1961 (2006).
68.
Defendant shall pay his CMP Obligation by electronic funds transfer, U.S. postal
money order, certified check. bank cashier's check, 01' bank money order,' Ifpayment is to be
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made by means other than by electronic funds transfer, then the payment shall be made payable
to the Commodity Futures Trading Conunission and sent to the address below:
COl1ul1oclity Futures Trading Commission
Division of Enforcement
ATTN: Accounts Receivables - AMZ 340
E-mail Box: 9-AMC-AMZ-AR-CFTC
DOT/FAAIMMAC
6500 S. MacArthur Blvd.
Oklahoma City, OK 73169
Telephone: (405) 954-5644
If payment by electronic funds transfer is chosen, Defendant shalt contact Linda Zurhorst 01' her
successor at the address above to receive payment instructions and shall fully comply with those
instructions. Defendant shall accompany payment of the CMP Obligation with a covel' letter that
identifies Defendant and the name and docket number of this proceeding. Defendant shall
simultaneously transmit copies of the covel' letter and the form ofpaymeat to the Chief Financial
Officer, Commodity Futtu'es Trading Commission, TIU'ee Lafaye~te Centre, 1155 21st Stl'eet,
NW, Washington, D.C. 20581.
VI. MISCELLANEOUS PROVISIONS
69.
Notice: All notices required to be given by any provision in this Consent Order
shall be sent certified mail, return receipt requested, as follows:
Notice to Conmlission:
Rick Glaser
U.S. Commodity Futures Trading Commission
Three Lafayette Centre
1155 21 st Street, NW
Washington, DC 20581
Notice to Defendant:
Feisal Sharif
Branford, CT
All such notices to the Commission shall reference the name and docket number of this action.
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70.
Change of Address/Phone: Until such time as Defendant. satisfies hi full his
Restitution Obligation and CMP Obligation as set forth in tlus Consent Order, Defendant shall
provide written notice to the Commission by celiified mail of any change to his telephone
number and mailing address within ten (10) calendar days of the change.
71.
Entire Agreement and Amendments: This Consent Order incorporates all of the
terms and conditions of the settlement among the parties hereto to date. Notlling shall serve to
amend 01' modify this Consent Order in any respect whatsoever, unless: (a) reduced to writing;
(b) signed by all parties hereto; and (c) approved by order ofthis Court.
72.
IllValidation: If any provision of this Consent Order 01' if the application of any
provision 01' circumstance is held invalid, then the remainder of tIus Consellt Ol'del' and the
applicatioll~
of the provision to any other person or circumstance shall not be affected by the
holding.
73.
Waiver: The failure of any patiy to this Consent Order 01' of any Pool participant
at any time to l:equire pei'fOlmance of any provision of this Consent Order shall in no maImer
affect the right of the party 01' Pool participant at a later time to enforce the same 01' any other
provision of this Consent Order. No waiver in one 01' mOl'e instances of the breach of any
provision contained in this Consent Order shall be deemed to be 01' construed as a further 01'
continuing waiver of such breach or waiver of the breach of any otIler provision ofthis Consent
Order.
74,
Acknowledgenients: Upon being served with copies of this Consent Order after
entry by the COULi, Defendant shall sign acknowledgements of such service and serve such
acknowledgements on the Court and the Commission within ten (10) calendar days.
I
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75,
C0l1tinuing Jurisdiotion of this Court: This Court shallretainjll1'isdiction of this
action to ensure compliance with this Consent Order and for all other purposes related to this
action, including any motion ,by Defendant to modify 01' for relieffl'Om the terms ofthis Consent
Order, '
76,
Injullctive and Equitable Relief Provisions: The injunctive and equitable relief
provisions of this Consent Order shall be binding upon Defendant, upon any person under his
authority or control, and upon any person who receives actual notIce ofthis Consent Order, by
personal sel'vice, e~mai1, facsimile 01' othel'wise insofar as he 01' she is acting in active concert 01'
participation with Defendant.
77,
Counterparts and Facsimile Execution: This 'Consent Order may be executed in
:two or more counterpal'ts, all of which shall be, considered one and the same agreement and shall
become effective when one 01' more counterparts have been signed by each of the parties hereto
and delivered (by facsimile, e-mail, or other~ise) to the other party, it being understood that all
parties need not sign the same counterpart. Any counterpart 01' other signature to this Consent
Order that is delivered by any means shall be deemed for all purposes as constituting good and
valid execution and delivery by such party of this Consent 01'del'.
78,
Defendant understands that the terms of the Consent Order are enforceable
tlu'ough contempt pl'Oceedings, and that in any such proceedings, he may not challenge the
validity ofthis Consent Order.
There being no just reason fO!' delay, the Clerk ofthe Court is hereby directed to enter
this Consent Orderfo!' Pe7'1lwnent Injunction, Civil Monetary Penalty and Other Equitable
ReliefAgainst Defendant Feisal Sharif.
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